posted at 12:11 pm on April 18, 2012 by Ed Morrissey

The big news last week from the Summit of the Americas was the Secret Service sex scandal, which had some in the Obama administration lamenting that no one paid much attention to Barack Obama’s efforts in Cartagena, Colombia to improve relations between the US and its allies. Today, the White House might be hoping for a little more attention to the scandal. After punting on an opportunity to defend the UK and the principle of self-determination over the Falkland Islands dispute with Argentina, Obama and his team got caught flat-footed by the nationalization of a Spanish oil company by Argentina’s government:

Yesterday, President Kirchner revealed another reason she returned to Buenos Aires: to announce the nationalization of the Argentine oil company, YPF, whose majority stakeholder is the Spanish energy firm, Repsol. The move has infuriated Repsol and Spanish officials, and raised concerns that this may be the first of many expropriations of privately run companies inArgentina, putting the government on the path toward aHugo Chávez-type model of state control over key resources.

“Once you start expropriating you don’t know where it will stop,” says Boris Segura, an analyst at the New York investment bank Nomura. “Mrs. Kirchner is now running close to Mr. Chávez’s model,” Segura says.

Argentina’s move to seize the controlling share of the YPF oil company owned by Spain’s Repsol brought swift condemnation from the European Union on behalf of its aggrieved member state.

Senior officials, including José Manuel Barroso, the European Commission president, expressed deep disappointment and aides insisted that “all possible options” were being studied. The bloc’s foreign ministers will discuss the issue at a meeting on Monday.

But EU officials and trade analysts believe the bloc’s options may be limited, despite the growing clamour from the continent’s corporate sector and some politicians to defend one of its companies against a hostile foreign government.

World Trade Organisation rules do not cover investment disputes, closing off one possible avenue. Other possibilities, such as raising tariffs on Argentinian goods, could backfire, according to Fredrik Erixon, director of the European Centre for International Political Economy think-tank.

Well, thank goodness we had the American President on the ground at the Summit of the Americas. That gave us an advantage over the EU, and prepared us for this move by Kirchner … right? Er … not exactly, as Investors Business Daily reports:

After a weekend of cavorting in Colombia, the White House was caught flat-footed by Argentina’s takeover of a big oil company whose loss will hike gas prices, harm Spain and slam U.S. investors. Lucky us.

Never was a response to a global outrage more mealy-mouthed than the one from the U.S. after Argentina’s President Cristina Fernandez de Kirchner, standing under a portrait of Evita Peron, announced a brazen grab for YPF, the Argentine oil company that’s 57% owned by Spain’s Repsol.

But the U.S.? “We are following developments on this issue. We are not currently aware of any WTO complaints related to this issue,” the State Department said.

Then, leading from behind after Spain vowed a “forceful” response, Secretary of State Hillary Clinton tried to toughen up: “Having an open market is a preferable model. Models that include competition and market access have been the most successful around the world.”

Argentina’s move to nationalize local oil company YPF (YPFD.BA), controlled by Spain’s Repsol (REP.MC), has spoiled years of planning by China’s Sinopec Group to buy the South American company, sources said.

Bankers said China’s second-largest oil company had held talks with Repsol to buy its controlling 57-percent stake in YPF. Chinese website Caixin.com cited a source as saying Sinopec had reached a non-binding agreement to take over YPF for more than $15 billion.

But plans by Argentine President Cristina Fernandez to seize control of YPF, which have incensed Spain and sparked international criticism, have killed any hopes that state-owned China Petrochemical Corp (Sinopec) could seal a deal, they said.

That may not be entirely bad news for the US, but the eruption of nationalization in yet another South American oil-producing nation certainly is. And so is the cluelessness that surrounds Obama and his foreign-policy team for their lack of response to the event.

Update: The Guardian reports that Repsol execs in Buenos Aires were also caught by surprise:

Even as president Cristina Fernández de Kirchner announced on TV her plan to nationalise Spanish-owned YPF, her emissaries were at the oilcompany’s 35-storey Buenos Aires headquarters giving its Spanish directors 15 minutes to leave the building.

The Falklands might be next:

Renationalisation is aligned in the minds of Fernández supporters with the renewed demand for sovereignty over the Falkland Islands in the South Atlantic claimed by Argentina as “Las Malvinas”.

“The Malvinas are Argentine, so is YPF,” say posters around the country and a T-shirt that artists who support Fernández have started wearing on internet campaigns in favour of the takeover. “This ends five centuries of white Spanish domination,” said a supporter. Argentina was ruled by Spain until its independence in 1816.

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What do you expect from this bunch? They certainly aren’t going to forcefully denounce what Kirchner did. Considering that this sort of seizure of private resources by the government is pretty much every liberal’s wet dream, I would say that the “Having an open market is a preferable model. Models that include competition and market access have been the most successful around the world.” nearly made her faint.

If it had been an American oil company that caused the Gulf oil spill two years ago instead of BP, Obama and his backers would have been calling for the same nationalization with ExxonMobil, ChevronTexaco and Phillips 66/Conoco/Union 76. Of course he’s not going to make a big deal about what Kirchner did in Argentina — ideologically, he and the rest of his support staff would have loved to have done it here, if only the opening was available.

Then, leading from behind after Spain vowed a “forceful” response, Secretary of State Hillary Clinton tried to toughen up: “Having an open market is a preferable model. Models that include competition and market access have been the most successful around the world.”

Wow! That’s telling the Argentines, Secretary Clinton. Next up, we can discuss further how to hand over the Maldives, er, Malvinas.

It appears from the news stories I read that Argentina renationalized YPF by buy 51% of the shares – is this accurate?

If that is the case, what is the outrage? Yes, I think it is stupid for a gov’t to go into these kinds of businesses, as they are always ridiculously inefficient, etc. But, it’s not the same thing as if Argentina simply ceased the business. If it went out and purchased the shares on the market at market price – what is the issue?

I’m assuming that they did not purchase the shares at market price? That they forced the sale of those shares?

Then, leading from behind after Spain vowed a “forceful” response, Secretary of State Hillary Clinton tried to toughen up: “Having an open market is a preferable model. Models that include competition and market access have been the most successful around the world.”

Only under a weak – extremely weak – “leader” such as Barack Hussein Obama would something like this happen right under his nose. Do you think that the Argentinian President worries about Barack’s response? Why should she? He’s way too busy leading us towards the light to worry about such little matters as the standing of the United States in the rest of the world.

The Obama administration will now assist Argentina in the take over (theft) of the automotive industries, student loan industry, and proper investment strategies in the energy sector. Viva la Revolution!

That may not be entirely bad news for the US, but the eruption of nationalization in yet another South American oil-producing nation certainly is

There’s more to this, Ed. YPF is down almost 30% today, after trading being halted. Repsol, Spanish owned, is going to lose billions. Spain has a major bond auction tonight. If investors shy away from the auction, partly because of Spain losing the revenue of a major energy company, then Spains rates will explode, and will drive down European markets. If that happens, US markets may be in for a bumpy ride tomorrow. Keep an eye out.

Am I the only one seriously questioning just what the hell was going down there? You’ve got the President utterly clueless about the Falklands, hinting at amnesty, and joking about scouting for vacation spots. You’ve got the SecState bar hopping and doing shots like some 20-year-old coed. You’ve got the 11 to 20 or more support team members(allegedly) with hookers and cocaine. And to top it all off there was utterly no support of the U.S. positions and an underlying contempt for America.

What was the point of even showing up? Maybe we will know more when SecStates Gone Wild comes out on DVD.

says our Secretary of State, Mrs. Clinton, a sure candidate for President in 2016. “Preferable” is such a ringing endorsement for capitalism over socialism or whatever the Argentine president is following. Cristina Fernández de Kirchner saw that the Chinese were about to buy control, and so she just decided to requisition it for free, to use for her socialist paradise in Argentina. The controlling owner, Repsol of Spain, is left out in the cold with nothing to show for its legal stake in the company. For Clinton and Obama, that is not the “preferable model.” Democrat leaders do not have a clue about free market economics, considering that this is the kind of nonsense that they spew. An open market is the only market that works, and that is what she should have said. If this country is to survive, we desperately need leaders who are economically literate. With our current leadership, we are on the road to disaster.

Is Repsol “Spanish owned” in the sense of being owned by the Spanish Gov’t? If not, who does “Spain” lose the revenue. I suppose they lose the taxes on the company. Was Repsol divested of all shares of YPF? If Spain itself owns Repsol, then how is Argentina owning YPF any different?

None of the stories I am reading are clear at all on what happened here. I ask up-thread about the stories that indicate that Argentina “bought” 51% of the shares of YPF. If they purchased the shares legitimately, what is the problem?

The American people chose to elect an idiot who seems hell bent on insulting their allies, and something must be done to stop Obama’s reckless foreign policy, before he does the dirty on his allies on every issue.”

One of the most poorly kept secrets in Washington is President Obama’s animosity toward Great Britain , presumably because of what he regards as its sins while ruling Kenya (1895-1963).

One of Barack Hussein Obama’s first acts as president was to return to Britain a bust of Winston Churchill that had graced the Oval Office since 9/11. He followed this up by denying Prime Minister Gordon Brown, on his first state visit, the usual joint press conference with flags.

The president was “too tired” to grant the leader of America ‘s closest ally a proper welcome, his aides told British journalists.

Mr. Obama followed this up with cheesy gifts for Mr. Brown and the Queen. Columnist Ian Martin described his behavior as “rudeness personified.” There was more rudeness in store for Mr. Brown at the opening session of the United Nations in September. “The prime minister was forced to dash through the kitchens of the UN in New York to secure five minutes of face time with President Obama after five requests for a sit down meeting were rejected by the White House,” said London Telegraph columnist David Hughes. Mr. Obama’s “churlishness is unforgivable,” Mr. Hughes said.

The administration went beyond snubs and slights last week when Secretary of State Hillary Clinton endorsed the demand of Argentine President Cristina Kirchner, a Hugo Chavez ally, for mediation of Argentina ‘s specious claim to the Falkland Islands , a British dependency since 1833. The people who live in the Falklands, who speak English, want nothing to do with Argentina . When, in 1982, an earlier Argentine dictatorship tried to seize the Falklands by force, the British — with strong support from President Ronald Reagan — expelled them.

“It is truly shocking that Barack Obama has decided to disregard our shared history,” wrote Telegraph columnist Toby Young. “Does Britain ‘s friendship really mean so little to him?” One could ask, does the friendship of anyone in the entire world mean anything to him?

“I recently asked several senior administration officials, separately, to name a foreign leader with whom Barack Obama has forged a strong personal
relationship during his first year in office,” wrote Jackson Diehl, deputy editorial page editor of the Washington Post, on Monday. “A lot of hemming and hawing ensued.” One official named French President Nicolas Sarkozy, but his contempt for Mr. Obama is an open secret. Another named German Chancellor Angela Merkel. But, said Mr. Diehl, “Merkel too has been conspicuously cool toward Obama.”

Mr. Obama certainly doesn’t care about the Poles and Czechs, whom he has betrayed on missile defense. Honduras and Israel also can attest that he’s been an unreliable ally and an unfaithful friend. Ironically, our relations with both Israel and the Palestinian Authority have never been worse. Russia has offered nothing in exchange for Mr. Obama’s abandonment of missile defense. Russia and China won’t support serious sanctions on Iran . Syria ‘s support for terrorism has not diminished despite efforts to normalize diplomatic relations. The reclusive military dictatorship that runs Burma has responded to our efforts at “engagement” by deepening its ties to North Korea .

And the Chinese make little effort to disguise their contempt for him.

For the first time in a long time, the President of the United States is actually distrusted by its allies and not in the least feared by its adversaries. Nor is Mr. Obama now respected by the majority of Americans. Understandably focused on the dismal economy and Mr. Obama’s relentless efforts to nationalize and socialize health care, Americans apparently have yet to notice his dismal performance and lack of respect in the world community.

Then, leading from behind after Spain vowed a “forceful” response, Secretary of State Hillary Clinton tried to toughen up: “Having an open market is a preferable model. Models that include competition and market access have been the most successful around the world.”

Am I the only one seriously questioning just what the hell was going down there? You’ve got the President utterly clueless about the Falklands, hinting at amnesty, and joking about scouting for vacation spots. You’ve got the SecState bar hopping and doing shots like some 20-year-old coed. You’ve got the 11 to 20 or more support team members(allegedly) with hookers and cocaine. And to top it all off there was utterly no support of the U.S. positions and an underlying contempt for America.

What was the point of even showing up? Maybe we will know more when SecStates Gone Wild comes out on DVD.

None of the stories I am reading are clear at all on what happened here. I ask up-thread about the stories that indicate that Argentina “bought” 51% of the shares of YPF. If they purchased the shares legitimately, what is the problem?Monkeytoe on April 18, 2012 at 12:38 PM

From the reactions, I would venture to say that this was not a “win-win” negotiation

I don’t understand? Obama is the first Global President, the European’s love him. Because of Obama being elected president of the United States, the World loves us again/ They gave him a Peace Prize for goodness sakes, just because he’s not, you know a Cowboy LOL!

Given the strength of Spain’s economy, especially its thriving and completely self-sufficient green energy sector, and Spain’s successful experiment with left-of-center government, I assume there is dancing in the streets of Madrid over this news.

No more “colonialism” of the oppressed Argentines, no more distasteful capitalism, and with wind turbines dotting the landscape the Spanish don’t need fossil fuels anyway.

From the reactions, I would venture to say that this was not a “win-win” negotiation

Jabberwock on April 18, 2012 at 12:41 PM

I agree that seems to be what is indicated. But, no story I’ve found explains who Argentina went about “purchasing” the shares. If they are traded on open markets, like NYSE, and Argentina simply purchased them – then why the outrage?

If not, and some kind of gov’t force was used to require YPF to sell shares at a lower price to Argentina, then then why is nobody reporting that? It is all very odd.

Indeed. The only thing that makes me think that Spain will be able to be sell its debt, is that the ECB will find some way to support the auction. It’s just been known for too long how critical this auction in Spain is, and I have a hard time believing that the ECB will let it fall flat on its own. But we’ll know in about 15 hrs.

Then, leading from behind after Spain vowed a “forceful” response, Secretary of State Hillary Clinton tried to toughen up: “Having an open market is a preferable model. Models that include competition and market access have been the most successful around the world.”

The optics at the Summit of the Americas: Obama’s Secret Service is cavorting with hookers, Hillary is out drinking and dancing and Obama is scoping out new vacation spots for Michelle. Under their noses, Argentina plans to nationalize a Spanish Oil Company and put the EU economy at risk plus take over the Falklands.

“This ends five centuries of white Spanish domination,” said a supporter. Argentina was ruled by Spain until its independence in 1816.

It’s time to get the white Hispanics in Latin America too. Everything connected to caucasians is now raaacist all over the globe. It’s only justice to reappropriate their money. Obama must be secretly thrilled and inspired to redouble his efforts to end the “bitter clingers” domination in the USA.

Well, as the Argentinian pointed out, YPF belonged to white Spaniards, and so needed to be liberated from their evil white clutches. How could Obama have a problem with that?

/sarc

RebeccaH on April 18, 2012 at 12:46 PM

The people with money and power in Argentina are all white European descendents. In fact, that is true of almost all of South America. People of native heritage are the poor underclass, while the European descendents rule. It’s just more so in Argentina than the other South American countries.

Which is why I always laugh that everyone pretends that “Hispanics” or “Latinos” are a race or ethnicity different than say, French or Italian. It’s not.

I ask up-thread about the stories that indicate that Argentina “bought” 51% of the shares of YPF. If they purchased the shares legitimately, what is the problem?

Monkeytoe on April 18, 2012 at 12:38 PM

My understanding is that the Argentine government did not buy the shares by, say, making an offer and having shareholders voluntarily sell their stock to the government.

Rather, they have already forced the acquisition of stock the government, with the amount of payment to be decided later, by the government. The parent company has demanded $10.5 billion in payment for the YPF stock that the government has nationalized, but the government has rejected the demand. The government will presumably pay something, but not an amount voluntarily agreed upon by both sides of the deal.

Is Repsol “Spanish owned” in the sense of being owned by the Spanish Gov’t? If not, who does “Spain” lose the revenue.

Monkeytoe on April 18, 2012 at 12:38 PM

No. From what I understand, it has to do with those Spanish banks who had large investments in a company that no longer exists. Repsol demanded 10.5 billion from Argentina for the loss of the company, and of course Agentina said “get bent”. Now, where this gets dicy is that many banks in Spain are already leveraged out the wazoo, and depends on every available bit of capital to support the enormous amount of “assets” they back. Now, all of a sudden, those banks have a huge capital short fall. Here’s Zerohedge with an assesment of the implications:

However, where discovery is ample is at the second degree, namely Spanish Repsol-YPF which is a majority owner of YPF, whose CDS continue soaring, and hit a whopping 391 earlier today, well over 100 bps compared to the Friday closing spread. For a massive energy production company this is a big move and we can only hope its Spanish bank shareholders are well insulated from mark to market losses, although somehow we doubt it.

…now we get the Bank of Spain, also taking advantage of today’s market rally to dump its own set of bad news, namely that Spanish banks will need to provision another €29.1 billion, and will have higher core capital requirements of €15.6 billion (this is fresh capital). 90 banks have already complied with the capital plan, 45 have yet to find the needed cash. Putting this into perspective, the amount already written-down is €9.2 billion. So, just a little more. And this assumes there are no capital shortfalls associated with any impairment from the YPF -> Repsol follow through, which as Zero Hedge already showed, would leave various Spanish banks exposed.

…lamenting that no one paid much attention to Barack Obama’s efforts in Cartagena, Colombia to improve relations between the US and its allies.

Why should we? He sat on the trade agreement with Columbia (negotiated, but not ratified under Bush) for three years, at the behest of his union paymasters. He is a petty, whiny martinet; he brings to mind the lyrics from National Lampoon’s “Deteriorata”:

…whether you can see it or not
The Universe
Is laughing behind your back.

That may not be entirely bad news for the US, but the eruption of nationalization in yet another South American oil-producing nation certainly is. And so is the cluelessness that surrounds Obama and his foreign-policy team for their lack of response to the event.

Isn’t our monetary policy also a form of nationalization? Only instead of nationalizing a corporation, they are nationalizing our money. Inflation is essentially a tax on the lower economic strata who can’t afford to invest a large percentage of their income. When the ruling class adds trillions of dollars to the money pool it is a redistribution of wealth from average Americans that spend most of their income in cash, to the ruling class. People’s cash may not be a corporation but it is still supposed to be their property, once upon a time.

What people don’t seem to understand is that inflation is a hidden tax. While the Republicans and Democrats argue about ridiculous budget proposals that don’t even balance for over 30 years, and promise they won’t dare raise taxes, in fact they ARE raising taxes through their monetary policy that both parties share. When the two parties raised the credit limit on the national credit card with the debt ceiling vote, that was a tax on the future, and when they print money, that is a tax in the present.

All the nonsense about the budgets and taxes are a sham, a dog an pony show for the masses, while they secretly raise taxes without the political liability of a “tax hike” bill or betraying promises not to “raise taxes”.

How this relates to the story is that nationalization of a company is bad, but when crony capitalists nationalize The Peoples cash to bail themselves and their cronies out, that is also wrong.